Mentor Graphics Reports Fiscal Third Quarter Results


MENTOR GRAPHICS CORPORATION
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except earnings per share data)


	Three Months Ended October 31,						Nine Months Ended October 31,
	2012			2011			2012			2011
Revenues:
System and software	$	166,301		$	154,363		$	455,614		$	411,503
Service and support		102,459			96,145			301,875			282,780
Total revenues		268,760			250,508			757,489			694,283
Cost of revenues: (1)
System and software		19,214			10,864			49,296			41,235
Service and support		29,290			27,621			86,834			79,676
Amortization of purchased technology		1,759			1,761			6,092			7,872
Total cost of revenues		50,263			40,246			142,222			128,783
Gross margin		218,497			210,262			615,267			565,500
Operating expenses:
Research and development (2)		76,214			81,305			220,211			220,578
Marketing and selling (3)		84,673			83,036			243,493			236,718
General and administration (4)		17,794			17,922			54,308			52,055
Equity in (earnings) loss of Frontline (5)		(381	)		134			(1,630	)		(2,022	)
Amortization of intangible assets (6)		1,242			1,296			4,547			4,361
Special charges (7)		1,146			1,164			3,800			7,388
Total operating expenses		180,688			184,857			524,729			519,078
Operating income		37,809			25,405			90,538			46,422
Other income (expense), net (8)		57			1,836			(239	)		1,890
Interest expense (9)		(4,652	)		(4,615	)		(13,983	)		(26,689	)
Income before income tax		33,214			22,626			76,316			21,623
Income tax expense (benefit) (10)		1,148			(1,445	)		(835	)		(4,429	)
Net income		32,066			24,071			77,151			26,052
Less: Income attributable to noncontrolling interest (11)		1,425			-			161			-
Net income attributable to Mentor Graphics
shareholders	$	30,641		$	24,071		$	76,990		$	26,052
Net income per share attributable to Mentor Graphics
shareholders:
Basic	$	0.27		$	0.22		$	0.70		$	0.24
Diluted	$	0.27		$	0.22		$	0.68		$	0.23
Weighted average number of shares outstanding:
Basic		111,575			109,501			110,454			110,423
Diluted		114,721			111,563			113,584			113,181

Refer to following page for a description of footnotes.


MENTOR GRAPHICS CORPORATION
FOOTNOTES TO UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In thousands)


Listed below are the items included in net income that management excludes in computing the non-GAAP financial measures referred to in the text of this press release. Items are further described under "Discussion of Non-GAAP Financial Measures."


	Three Months Ended October 31,						Nine Months Ended October 31,
	2012			2011			2012			2011
(1) Cost of revenues:
Equity plan-related compensation	$	393		$	249		$	1,080		$	753
Amortization of purchased technology		1,759			1,761			6,092			7,872
	$	2,152		$	2,010		$	7,172		$	8,625

(2) Research and development:
Equity plan-related compensation	$	2,272		$	2,005		$	6,604		$	6,119

(3) Marketing and selling:
Equity plan-related compensation	$	1,644		$	1,365		$	4,818		$	4,393

(4) General and administration:
Equity plan-related compensation	$	1,400		$	1,495		$	4,660		$	5,358

(5) Equity in (earnings) loss of Frontline:
Amortization of purchased technology and other identified intangible assets	$	1,242		$	1,242		$	3,726		$	3,726

(6) Amortization of intangible assets:
Amortization of other identified intangible assets	$	1,242		$	1,296		$	4,547		$	4,361

(7) Special charges:
Rebalance, restructuring, and other costs	$	1,146		$	1,164		$	3,800		$	7,388

(8) Other income (expense), net:
Net (gain) loss of unconsolidated entities	$	(38	)	$	(1,484	)	$	(110	)	$	(1,432	)

(9) Interest expense:
Amortization of debt discount and premium, net	$	1,342		$	1,250		$	3,955		$	3,653
Premium and costs related to debt retirement		-			-			-			11,504
	$	1,342		$	1,250		$	3,955		$	15,157

(10) Income tax expense (benefit):
Non-GAAP income tax effects	$	(6,607	)	$	(7,050	)	$	(20,468	)	$	(17,233	)

(11) Income attributable to noncontrolling interest:
Amortization of intangible assets and income tax effects	$	96		$	-		$	(506	)	$	-

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